Question 1

Adam Smith developed the theory of comparative advantage as we know it today.

Accepted Answer

A) True 
 B)False

Question 2

Belarus has a comparative advantage in the production of linen,but Russia has an absolute advantage in the production of linen.If these two countries decide to trade,

Accepted Answer

A)   Belarus should export linen to Russia.
B)   Russia should export linen to Belarus.
C)   trading linen would provide no net advantage to either country.
D)   Without additional information about opportunity costs, this question cannot be answered.E) B) and D)
F) C) and D)

Question 3

In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine?

Accepted Answer

A)   Americans know less than Italians know about cooking noodles.
B)   The United States has an absolute advantage over Italy in producing noodles.
C)   Italy has a comparative advantage over the United States in producing wine.
D)   The opportunity cost of producing a gallon of wine is the same for Italy as it is for the United States.E) A) and D)
F) None of the above

Question 4

Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
 
-Refer to Table 3-1.At which of the following prices would both Andia and Zardia gain from trade with each other?

Accepted Answer

A)   6 bushels of wheat for 10.5 pounds of beef
B)   12 bushels of wheat for 19 pounds of beef
C)   24 bushels of wheat for 34 pounds of beef
D)   Andia and Zardia could not both gain from trade with each other at any price.E) B) and C)
F) A) and D)

Question 5

Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate.
 
-Refer to Table 3-6.Assume that Maya and Miguel each has 40 hours available.If each person divides his/her time equally between the production of mixers and toasters,then total production is

Accepted Answer

A)   2 mixer and 8 toasters.
B)   3.5 mixers and 6 toasters.
C)   5 mixers and 4 toasters.
D)   7 mixers and 12 toasters.E) A) and B)
F) All of the above

Question 6

Henry can make a bird house in 3 hours and he can make a bird feeder in 1 hour.The opportunity cost to Henry of making a bird house is 1/3 bird feeder.

Accepted Answer

A) True 
 B)False

Question 7

If US workers can produce everything in less time than Mexican workers,it is not possible for the US to gain from trade with Mexico.

Accepted Answer

A) True 
 B)False

Question 8

Figure 3-5
 
-Refer to Figure 3-5.At which of the following prices would both Hosne and Merve gain from trade with each other?

Accepted Answer

A)   5 wallets for 1.25 purses
B)   5 wallets for 2.5 purses
C)   5 wallets for 3.75 purses
D)   Hosne and Merve could not both gain from trade with each other at any price.E) None of the above
F) C) and D)

Question 9

Figure 3-3
 
-Refer to Figure 3-3.Arturo should specialize in the production of

Accepted Answer

A)   tacos and Dina should specialize in the production of burritos.
B)   burritos and Dina should specialize in the production of tacos.
C)   both goods and Dina should specialize in the production of neither good.
D)   neither good and Dina should specialize in the production of both goods.E) B) and D)
F) None of the above

Question 10

Figure 3-3
 
-Refer to Figure 3-3.If the production possibilities frontiers shown are each for one day of production,then which of the following combinations of tacos and burritos could Arturo and Dina together produce in a given day?

Accepted Answer

A)   400 tacos and 350 burritos
B)   500 tacos and 250 burritos
C)   600 tacos and 150 burritos
D)   700 tacos and 100 burritosE) A) and D)
F) All of the above

Question 11

Figure 3-4
 
-Refer to Figure 3-4.Perry has an absolute advantage in the production of

Accepted Answer

A)   novels and Jordan has an absolute advantage in the production of poems.
B)   poems and Jordan has an absolute advantage in the production of novels.
C)   novels and Jordan has an absolute advantage in the production of neither good.
D)   neither good and Jordan has an absolute advantage in the production of novels.E) A) and D)
F) B) and C)

Question 12

Trade can make everybody better off because it

Accepted Answer

A)   increases cooperation among nations.
B)   allows people to specialize according to comparative advantage.
C)   requires some workers in an economy to be retrained.
D)   reduces competition among domestic companies.E) None of the above
F) A) and B)

Question 13

Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
 
-Refer to Figure 3-10.If point A represents Alice's current production and point B represents Betty's current production,under what circumstances can both Alice and Betty benefit from specialization and trade?

Accepted Answer

A)   Alice produces more pizzas and Betty produces more lemonade.
B)   Alice produces more lemonade and Betty produces more pizzas.
C)   Both Alice and Betty produce only pizzas.
D)   There are no circumstances under which both Alice and Betty can benefit from specialization and trade.E) B) and C)
F) C) and D)

Question 14

Figure 3-5
 
-Refer to Figure 3-5.Hosne has an absolute advantage in the production of

Accepted Answer

A)   purses and Merve has an absolute advantage in the production of wallets.
B)   wallets and Merve has an absolute advantage in the production of purses.
C)   both goods and Merve has an absolute advantage in the production of neither good.
D)   neither good and Merve has an absolute advantage in the production of both goods.E) C) and D)
F) All of the above

Question 15

Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate.
 
-Refer to Table 3-6.At which of the following prices would both Maya and Miguel gain from trade with each other?

Accepted Answer

A)   4 mixers for 7 toasters
B)   8 mixers for 10 toasters
C)   12 mixers for 18 toasters
D)   Maya and Miguel could not both gain from trade with each other at any price.E) A) and C)
F) All of the above

Question 16

Figure 3-7
 
-Refer to Figure 3-7.If Bintu and Juba switch from each person dividing her time equally between the production of cups and bowls to each person spending all of her time producing the good in which she has a comparative advantage,then total production will increase by

Accepted Answer

A)   1 bowl and 1 cup.
B)   2 bowls and 4 cups.
C)   3 bowls and 5 cups.
D)   4 bowls and 8 cups.E) A) and B)
F) A) and C)

Question 17

As a student,Anne spends 40 hours per week writing term papers and completing homework assignments.On one axis of her production possibilities frontier is measured the number of term papers written per week.On the other axis is measured the number of homework assignments completed per week.Anne's production possibilities frontier is a straight line if

Accepted Answer

A)   she faces no trade-off between writing term papers and completing homework assignments.
B)   she can switch between writing term papers and completing homework assignments at a constant rate.
C)   the rate at which she can switch between homework assignments and term papers depends on the number of homework assignments she is completing and on the number of term papers she is writing.
D)   she is required by her professors to spend half of her time on term papers and the other half of her time on homework assignments.E) B) and C)
F) A) and D)

Question 18

Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
 
-Refer to Figure 3-10.Which of the following statements is correct regarding absolute advantage?

Accepted Answer

A)   Alice has an absolute advantage in the production of both lemonade and pizzas.
B)   Betty has an absolute advantage in the production of both lemonade and pizzas.
C)   Alice has an absolute advantage in the production of pizzas while Betty has an absolute advantage in the production of lemonade.
D)   Alice has an absolute advantage in the production of lemonade while Betty has an absolute advantage in the production of pizzas.E) A) and B)
F) A) and D)

Question 19

Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
 
-Refer to Table 3-2.Which of the following represents Aruba's production possibilities frontier when 100 labor hours are available?

Accepted Answer

A)   
B)   
C)   
D)  E) A) and B)
F) A) and C)

Question 20

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year,and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year.There are 20 workers in Cornland and 20 workers in Oatland.If the two countries do not trade,Cornland will produce and consume 400 bushels of corn and 100 bushels of oats,while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats.If each country made the decision to specialize in producing the good in which it has a comparative advantage,then the combined yearly output of the two countries would increase by

Accepted Answer

A)   280 bushels of corn and 450 bushels of oats.
B)   340 bushels of corn and 500 bushels of oats.
C)   360 bushels of corn and 520 bushels of oats.
D)   360 bushels of corn and 640 bushels of oats.E) A) and B)
F) B) and D)

Exam 3: Interdependence and the Gains from Trade.

Adam Smith developed the theory of comparative advantage as we know it today.

Correct Answer
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Correct Answer
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Trade can make everybody better off because it

Correct Answer
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Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.Which of the following statements is correct regarding absolute advantage?

Correct Answer
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Figure 3-3 -Refer to Figure 3-3.Arturo should specialize in the production of

Correct Answer
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In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine?

Correct Answer
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Figure 3-5 -Refer to Figure 3-5.At which of the following prices would both Hosne and Merve gain from trade with each other?

Correct Answer
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Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-1.At which of the following prices would both Andia and Zardia gain from trade with each other?

Correct Answer
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Table 3-2 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-2.Which of the following represents Aruba's production possibilities frontier when 100 labor hours are available?

Correct Answer
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Henry can make a bird house in 3 hours and he can make a bird feeder in 1 hour.The opportunity cost to Henry of making a bird house is 1/3 bird feeder.

Correct Answer
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Figure 3-7 -Refer to Figure 3-7.If Bintu and Juba switch from each person dividing her time equally between the production of cups and bowls to each person spending all of her time producing the good in which she has a comparative advantage,then total production will increase by

Correct Answer
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Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-6.At which of the following prices would both Maya and Miguel gain from trade with each other?

Correct Answer
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Figure 3-5 -Refer to Figure 3-5.Hosne has an absolute advantage in the production of

Correct Answer
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Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.If point A represents Alice's current production and point B represents Betty's current production,under what circumstances can both Alice and Betty benefit from specialization and trade?

Correct Answer
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If US workers can produce everything in less time than Mexican workers,it is not possible for the US to gain from trade with Mexico.

Correct Answer
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Figure 3-3 -Refer to Figure 3-3.If the production possibilities frontiers shown are each for one day of production,then which of the following combinations of tacos and burritos could Arturo and Dina together produce in a given day?

Correct Answer
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Belarus has a comparative advantage in the production of linen,but Russia has an absolute advantage in the production of linen.If these two countries decide to trade,

Correct Answer
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Figure 3-4 -Refer to Figure 3-4.Perry has an absolute advantage in the production of

Correct Answer
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Exam 3: Interdependence and the Gains from Trade.

Adam Smith developed the theory of comparative advantage as we know it today.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Trade can make everybody better off because it

Correct AnswerverifiedShow Answer

Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.Which of the following statements is correct regarding absolute advantage?

Correct AnswerverifiedShow Answer

Figure 3-3 -Refer to Figure 3-3.Arturo should specialize in the production of

Correct AnswerverifiedShow Answer

In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine?

Correct AnswerverifiedShow Answer

Figure 3-5 -Refer to Figure 3-5.At which of the following prices would both Hosne and Merve gain from trade with each other?

Correct AnswerverifiedShow Answer

Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-1.At which of the following prices would both Andia and Zardia gain from trade with each other?

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Table 3-2 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-2.Which of the following represents Aruba's production possibilities frontier when 100 labor hours are available?

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Henry can make a bird house in 3 hours and he can make a bird feeder in 1 hour.The opportunity cost to Henry of making a bird house is 1/3 bird feeder.

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Figure 3-7 -Refer to Figure 3-7.If Bintu and Juba switch from each person dividing her time equally between the production of cups and bowls to each person spending all of her time producing the good in which she has a comparative advantage,then total production will increase by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-6.At which of the following prices would both Maya and Miguel gain from trade with each other?

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Correct AnswerverifiedShow Answer

Figure 3-5 -Refer to Figure 3-5.Hosne has an absolute advantage in the production of

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Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.If point A represents Alice's current production and point B represents Betty's current production,under what circumstances can both Alice and Betty benefit from specialization and trade?

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If US workers can produce everything in less time than Mexican workers,it is not possible for the US to gain from trade with Mexico.

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Figure 3-3 -Refer to Figure 3-3.If the production possibilities frontiers shown are each for one day of production,then which of the following combinations of tacos and burritos could Arturo and Dina together produce in a given day?

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Belarus has a comparative advantage in the production of linen,but Russia has an absolute advantage in the production of linen.If these two countries decide to trade,

Correct AnswerverifiedShow Answer

Figure 3-4 -Refer to Figure 3-4.Perry has an absolute advantage in the production of

Correct AnswerverifiedShow Answer

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